Mark Cohen: Law Firms Have Entered a New Collaborative Era [Comment]

Mark Cohen, the founder of legal delivery consultancy, Legal Mosaic, has said that a tectonic shift in the global legal sector is driving a need for collaboration between law firms and other types of business, often in search of legal tech solutions.

This move is so profound that it effectively marks the beginning of a new era in the global legal market that we have just seen the start of.

While there have been many examples recently of large law firms working in collaboration with other businesses to provide legal tech and process capability, Cohen says this is merely part of a far wider trend that is reshaping the legal market.

Recent examples of tech-led collaboration include:

Allen & Overy and Deloitte, working together on analysis of OTC derivative contracts.

Ashurst and Axiom, also working together on derivative contract analysis.

Deloitte and Kira Systems, working on applied AI cognition and extraction tasks.

One could take this further with the many examples of law firms working with applied AI providers, such as RAVN, LEVERTON and also Kira, to speed contract analysis for a variety of clients.

The fundamental reason for this change is because the value proposition of law firms has changed irrevocably in the minds of large corporate clients, especially since the financial crisis of 2008/9.

Former US law firm managing partner, Cohen explains: ‘Fundamentally, what has happened is that the bespoke myth that most of what a law firm does is ‘one-off’, high value or expert work has been shattered.’

Mark Cohen, Founder, Legal Mosaic

‘In the past we reached a point where leverage grew considerably and for many lawyers their key client was their law firm, not the external client, whom they rarely saw. A large part of what law firms did ceased to be true advisory work. And it is these tasks that are now increasingly performed outside the traditional BigLaw environment.’

Cohen adds that the financial focus on internal growth to boost profits overtook previous objectives, even if that sometimes meant providing a costly, inefficient service to clients.

For example, he explains that even when early legal tech such as the first e-discovery software was developed, it did not result in cost reduction and streamlining case management. Instead, this was used by law firms as a ‘profit escalator’ to massively increase the number of documents that should be examined, which meant in turn more need for highly paid junior lawyers, which increased client costs.

‘Only law firms would use technology as a profit escalator,’ Cohen notes wryly.

He also noted that when one looked at how most law firms used technology in the past it was often inward-facing, rather than being designed for the benefit of the client. For example, it had a focus on billing, or fee earner time tracking.

In effect, the ‘Big Law’ model had become inward looking and self-serving, and clients were unsurprisingly eventually going to reach a point where they would no longer accept the status quo. That change has now taken place.

Cohen states as clients have challenged the old status quo; demanded better efficiencies on process matters; debunked the ‘all we do is bespoke work’ myth of outside counsel; and also seen GC and inhouse departments grow in size, prestige and capability, then the old model of law firms is fundamentally unsustainable.

He predicts the collaborations we have seen so far is just the beginning, with hook-ups between: tech providers and law firms; law firms working with Big Four accountants; clients working with distributed legal providers (e.g. LOD) and other formulations to become the norm.

Artificial Lawyer asked if this new ‘Collaborative Era’ would last indefinitely, or whether perhaps it would evolve into a new period of hybrid law/tech services businesses that had fused together?

Cohen said this would not happen in the short to medium term. However, he did foresee the end of the Collaborative Era at some point.

One route would be via major non-traditional legal businesses, which had fully embraced legal tech (often developing their own tech internally), but that also ‘cherry picked the best lawyers who had great client relationships’ and so could then detach large corporates from the traditional big legal brands by offering both bespoke and efficiency-driven services.

He noted that one could see that happening with the Big Four firms’ legal arms, with their huge resources elsewhere in the business to develop better legal tech solutions, eventually ceasing to collaborate with leading law firms and become a dominating force in the legal market vertical by themselves.

Despite the American Bar Association’s (ABA) general ban on multidisciplinary practices offering legal services, as well as the Sarbanes-Oxley Act that limits the combined provision of legal and accounting services to US-listed companies, Cohen was confident change of this type could still happen.

He noted that despite the Big Four already providing litigation support and due diligence services in the US they had not been hit with an ‘unauthorised provision of legal services’ law suit, as some consumer level companies had in the past. Eventually it would be recognised that the Big Four were de facto significant players in the US legal market, as they already are in some markets such as in Asia, and regardless of ABA model rules would carve out market share.

The two other potential ways that we might see an end to collaboration would be either digital native legal providers such as Legal Zoom and their like growing far larger and far more into the commercial space; or thirdly that a large number of inhouse legal teams at the world’s major companies would simply take the vast majority of non-bespoke work inhouse by making use of the latest technology, such as applied AI.

He added that when competing with inhouse legal teams for talent even some of the best-remunerated law firms would find it hard to retain the best non-lawyer legal tech experts. ‘Would you rather be a CIO in a law firm (i.e. in a non-partner, operational support role), or be the CIO of a Global 500 company?’

Cohen is clear that being the CIO in a global company, such as one of the Big Four, would likely be a far more attractive proposition, especially given that many companies this size have revenues of $30bn-plus, while the largest law firm in the world is less than $2.5bn.

In conclusion, there has been a fundamental shift in the legal market and the development of advanced legal tech, applied AI and the movement into collaboration are its symptoms not its cause. Moreover, it is a shift that there is no coming back from, in fact it will likely only accelerate.